PBM Compliance-Oversight: What you Don’t Know Can Cost You

Whether plans stick their heads in the sand or not, it doesn’t change the fact that delegating services to a contracted entity is emerging as one of the fastest growing areas of audit risk.
CMS defines Compliance-Oversight Activities to include developing effective metrics and controls, monitoring and reporting, and risk assessment with corrective action for any delegated entities or contractors. Compliance refers to all contract compliance requirements and includes FWA compliance elements and requirements of the plan sponsor.
A Compliance-Oversight Plan should be structured in a way that is data driven – quantifiable performance metrics and monitoring with measurable outcomes. The goals of a Compliance Oversight plan should be proactive – to prevent, detect and respond (“find and fix”) and focused – targeted on risk areas.
CMS has made it clear that the stakes have never been higher for the cost of non-compliance. In the area of oversight of contracted entities the warnings are beginning to play out in a variety of ways. At best, a plan sponsor can expect a corrective action plan that comes with intense scrutiny. Recently, CMS announced a series of actions against non-compliant activities that included fines and penalties. At worst, a plan risks non-renewal of its contract with CMS.
There are more subtle costs to the lack of compliance oversight that may not bring down the wrath of a CMS audit. Plans that fail to monitor the activities of their PBM effectively may have a deleterious impact on customer satisfaction. Poor satisfaction will result in lower CAHPS scores and reduced Plan Ratings.
Kaiser Health announced this week that the 9 Five-Star Plans earned in excess of $4 billion in bonus payments for 2012 Plan Ratings. Starting in January, plans with three stars or better will get bonuses of 3 to 5 percent of their total Medicare payments. Five-star plans also can market to and enroll members year-round, while all other plans enrollment is limited to Medicare’s annual open period. What’s more, CMS will aggressively encourage consumers to move their Medicare policies to the higher-ranked plans, giving them a big boost.

Failure to adequately provide compliance oversight to PBMs or other contracted entities is not only risky; it is also a costly failure by a plan sponsor at a time when resources are diminishing. Don’t be caught unprepared.

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